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United Kingdom

Company Car Tax Reform

legislation type Legislative
Passed in 2002
In 2002, the UK Company Car Tax system was revised to be carbon-based. All company cars first registered after January 1998 are taxed on a percentage of their list price according to CO2 emission bands, measured in grams per kilometre (g/km).

The reform was intended to remove the perverse incentive in the existing system to reduce the tax due by driving unnecessary extra business miles and to provide a significant incentive to company cars drivers to choose more fuel-efficient vehicles.

To further promote environmentally friendly vehicles, the government introduced a progressive percentage charge rate system. This system has evolved over time - as of 2011, the charge is 0% for care with zero emissions, rising stepwise to a maximum of 35% for emissions of 225g/km and higher.


from the Grantham Research Institute
from the Grantham Research Institute
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